When there are no specific sinking-fund attach ments to public debts, the repayment of public debt might he regarded, so far as the contract with creditors is concerned, as a work of super erogation. But just as a business man gains in credit by prompt or anticipated payments, so a policy more liberal to creditors than legal re quirements demand redounds to the credit of the State. Repayment of the principal is not essen tial, as we have seen, to the maintenance of public credit, as States whose debt continues to increase stand in good repute, but is a policy to be recommended. Of its utility as an outlet for surplus revenues we shall speak in discussing financial policy. For conversion of public debts, see DEBT, PUBLIC.
Having considered public debt in relation to public credit, we may briefly outline its rela lions to liSeid Operaticns. The creation of debt is a source. of which to equalize the differenee between piddle expenditures and ordinary revenue. This difference may be eau-ed. by irregularity of revenue or casual deficit.
Loans are then required in anticipation of rev enue, and in such cases they should be temporary, of short duration. subject to redemption at will or in a brief period. If at the expiration of this period there is no accumulation of funds avail able for payment, the only alternatiVO ;It• all extension of the loans or their incorporation in the funded debt. The differenee between ordi• nary revenue and expenditure may be caused by a national emergency, such as war, to provide for which the ordinary sources of income, however stretched, are wholly inadequate. or, again, the difference may be caused by the investment in great public works, which either in their effect on the general tax-producing capacity of the people, or by revenues appropriate to themselves, are expected to pay for them.•Ives in the long run. In the cases named a resort to funded debt is the only way open by which to na!et such ex penditures. For a further development of these prineiples, see DEBT, PUBLIC.